Apr 13 - Rialto Secures Vitol as Partner in West Africa

Source Press Release
Company Vitol 
Tags Corporate Deals, Deals, Upstream Activities
Date April 23, 2013

Rialto is pleased to announce that it has today entered into a term sheet with Vitol E&P ("Vitol") setting out the terms upon which Rialto and  Vitol will work together to develop the Company's interests in Côte d'Ivoire and Ghana.

Transaction Overview

  • Vitol to acquire, subject to regulatory and joint venture partner approval, a 20% interest in Rialto Energy (Ghana) Limited ("Rialto Ghana") in exchange for providing a facility to cover Rialto's US$ 7.7 million obligations for the drilling of the high-impact Starfish-1 exploration well in the Accra Block, Ghana, due to spud in June 2013;
  • Vitol to acquire 65% of the shares in Rialto Energy (Côte d'Ivoire) Limited ("Rialto CdI") in exchange for providing US$ 50 million of capital to be invested in a to be agreed Block CI-202 work programme subject to the conditions outlined hereunder; and
  • Release of Vantage Sapphire drilling rig which had been due to be on Block CI-202 in May 2013.

Strategic Rationale

  • The Board of Rialto is of the view that the proposed transaction with Vitol ("Vitol Transaction") delivers significant advantages to the Company. In particular it:
  • forms a partnership with Vitol, a company with substantial financial and technical capability with existing assets in Rialto's area of operations in Côte d'Ivoire and Ghana and a proven track record of monetising upstream assets in West Africa;
  • delivers access to a significant potential future source of capital for investment in Block CI-202;
  • allows Rialto to work with Vitol and the Government of Côte d'Ivoire to pursue a potential multi-asset, shallow water gas development strategy for the discovered resources in both Block CI-202 and neighbouring blocks;
  • enables the Company and Vitol to undertake further technical work to define the existing contingent and prospective resource in Block CI-202 ahead of any further drilling;allows the Company to maintain its exposure to the high-impact Starfish-1 well in Ghana that is anticipated to spud in June 2013 targeting 292 mmbbls gross prospective unrisked mean resources (based on Ophir Energy's estimates as operator); and
  • reduces Rialto's financial commitments against a backdrop of funding pressures.

Côte d'Ivoire

Under the terms of the Vitol Transaction,  Vitol will acquire 65% of the shares in Rialto Côte d'Ivoire Limited (which holds an 85% interest in the Block CI-202 PSC and a 74% interest in the Gazelle Exclusive Exploitation Area which was granted in April 2012) ("Rialto CdI" and together with  Vitol, the "Parties") subject to:

  • finalisation and execution of relevant contractual documentation implementing the transaction;
  •  the commercial framework for an integrated development of contingent gas resources in Block CI-202 and adjacent blocks being agreed;
  • alignment with the Government of Côte d'Ivoire regarding the optimum Second Exploration Period Work Programme under the Block CI-202 PSC;
  • completion of remaining due diligence; and
  • relevant corporate and other regulatory approvals.

Upon satisfaction of the conditions set out above, Vitol will fund the first US$ 50 million of an appraisal and development work programme pursued by Rialto CdI (other than the dry hole costs of the next exploration commitment well drilled on Block CI-202 that will be funded pro-rata by Rialto and  Vitol). The conditions must be fulfilled by 9 November 2013, which is the current expiry date of the Second Exploration Period on Block CI-202.

Rialto has met recently with the Côte d'Ivoire Minister of Energy and the Directorate of Hydrocarbons to discuss the proposed integrated development concept and looks forward to progressing discussions in the coming weeks. The meetings have confirmed the strong desire of the Government of Côte d'Ivoire to see more gas developed and produced for supply to the local power generation sector, where significant future growth is being forecast to support the expansion of the mining sector in Côte d'Ivoire.

In addition, Afren plc, as current operator of Block CI-01, has expressed a willingness to examine the possibility of jointly developing the gas resources in blocks CI-01 and CI-202 to meet the Government of Côte d'Ivoire's objectives and the national imperative to secure early additional gas supply.

Ghana

Under the terms of the Vitol Transaction,  Vitol will, subject to joint venture partner approval, acquire a 20% economic interest in Rialto Ghana, which holds Rialto's 12.5% participating interest in the Accra Block, in exchange for providing a facility to fund Rialto's US$ 7.7 million obligations in relation to the Starfish-1 well.

To the extent that Rialto draws down on the facility, Vitol's economic interest in Rialto Ghana will increase pro-rata up to a maximum of 51% ownership.

Any transfer of shares in Rialto Ghana to Vitol will be subject to approval by  GNPC and the Government of Ghana.

Release of Vantage Sapphire Drilling Rig (the "Rig")

Further to the Vitol Transaction, Rialto advises that it has terminated the contract for the Rig which had been due to commence drilling operations in Block CI-202 during the course of May 2013. The Company is currently in discussions with the owner of the Rig,  Vantage Drilling Company ("Vantage") regarding the termination payment.

The decision to terminate the contract with Vantage was taken by the Board to enable further work to be undertaken on the exploration targets in Block CI-202 and to facilitate the Vitol Transaction.

Rialto has only recently taken delivery of the Pre-Stack Depth Migration ("PSDM") study performed on the 3D seismic acquired in January 2012, and further analytical work (including inversion studies) is ongoing. The Company views that the additional time brought on by the termination of the rig contract will allow this important work, which is key to the successful placement of future wells, to be completed in the most robust manner possible.

Funding

Prior to making the termination payment to Vantage as described above, the Company's cash balance is approximately US$ 15 million.

Whilst the Vitol Transaction fulfils the Company's immediate funding requirements, the Company continues to review its funding options in relation to the work programmes in Ghana and Côte d'Ivoire, including its share of the next exploration commitment well in Block CI-202.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd